Seizing the Opportunities for Hydrogen...As we rebuild our economy from the impacts of COVID-19 and...

Seizing the Opportunities for Hydrogen

A Call to Action

December, 2020

HYDROGEN STRATEGY FOR CANADA

DISCLAIMER

The Hydrogen Strategy for Canada (the “Strategy”) provides the perspective of numerous stakeholders

from across governments, and industry, as well as Indigenous organizations, non-governmental

organizations, and academia. While the Government of Canada led the development of the Strategy and

consulted broadly with industry, the contents, findings, and recommendations expressed in the Strategy

reflects a combined view and may not be unanimously endorsed by all of the participating organizations

and their employees.

Aussi disponible en français sous le titre : Stratégie canadienne pour l’hydrogène Cat. No. M134-65/2020E-PDF (Online) ISBN 978-0-660-36760-6

Foreword to the Hydrogen Strategy for Canada | Pg. I

Foreword to the Hydrogen Strategy for Canada

For more than a century, our nation’s brightest minds have been working on the technology to turn the invisible promise of hydrogen into tangible solutions. Canadian ingenuity and innovation has once again brought us to a pivotal moment.

As we rebuild our economy from the impacts of COVID-19 and fight the existential threat of climate change, the development of low-carbon hydrogen is a strategic priority for Canada. The time to act is now.

The Hydrogen Strategy for Canada lays out an ambitious framework for actions that will cement hydrogen as a tool to achieve our goal of net-zero emissions by 2050 and position Canada as a global, industrial leader of clean renewable fuels.

This strategy shows us that by 2050, clean hydrogen can help us achieve our net-zero goal—all while creating jobs, growing our economy, and protecting our environment. This will involve switching from conventional gasoline, diesel, and natural gas to zero-emissions fuel sources, taking advantage of new regulatory environments, and embracing new technologies to give Canadians more choice of zero emission alternatives.

As one of the top 10 hydrogen producers in the world today, we are rich in the feedstocks that produce hydrogen. We are blessed with a strong energy sector, and the geographic assets that will propel Canada to be a major exporter of hydrogen and hydrogen technologies.

Hydrogen might be nature’s smallest molecule but its potential is enormous. It provides new markets for our conventional energy resources, and holds the potential to decarbonize many sectors of our economy, including resource extraction, freight, transportation, power generation, manufacturing, and the production of steel and cement.

This Strategy is a call to action. It will spur investments and strategic partnerships across the country and beyond our borders. It will position Canada to seize economic and environmental opportunities that exist coast to coast. Expanding our exports. Creating as many as 350,000 good, green jobs over the next three decades. All while dramatically reducing our greenhouse gas emissions. And putting a net-zero future within our reach.

The importance of Canada’s resource industries and our clean technology sectors has been magnified during the pandemic. We must harness our combined will, expertise and financial resources to fully seize the opportunities that hydrogen presents.

This strategy is the product of three years of study and analysis, including extensive engagement sessions, where we heard from more than 1,500 of our country’s leading experts and stakeholders. But its release is not the end of a process. This is only the beginning.

Together, we will use this Strategy to guide our actions and investments. By working with provinces and territories, Indigenous partners, and the private-sector and by leveraging our many advantages, we will create the prosperity we all want, protect the planet we all cherish and we will ensure we leave no one behind.

The Honourable Seamus O’Regan Canada’s Minister of Natural Resources

Contributors | Pg. II

Contributors

For the past three years, the Government of Canada, under the leadership of Natural Resources Canada,

has been working with private sector stakeholders, Indigenous organizations, non-Government

organizations, and governments at all levels to inform the development of a Hydrogen Strategy for

Canada. This Strategy contains input from hundreds of companies, organizations and individuals sourced

through a variety of different forums, workshops, teleconferences, bilateral discussions, and dialogue

through existing working groups. While the Government of Canada led the development of the Strategy

and consulted broadly with industry, the contents, findings, and recommendations expressed in the

Strategy reflects a combined view and may not be unanimously endorsed by all of the participating

organizations and their employees.

The Government has also commissioned a number of key studies on topics such as hydrogen codes and

standards, awareness, demand modelling, and GHG emissions reduction potential. These studies along

with key international reports, for example from the International Energy Agency and Hydrogen Council,

have helped inform the development of the Strategy.

Zen and the Art of Clean Energy Solutions (Zen) is the lead author of this strategy on behalf of the

Government of Canada. Zen together with the Institute for Breakthrough Energy + Emission Technologies

(IBET) led the aggregated 2050 hydrogen demand modelling work to determine the potential role

hydrogen can play in Canada’s future energy system. The Strategy summarizes and integrates stakeholder

inputs and previous studies, as well as recent modelling and analysis, into a single cohesive document.

The Hydrogen Strategy for Canada is a strategic directional document based on best available information

at this time. Adjustments will be made as technology, research, codes and standards, the international

hydrogen landscape, and policy evolves. Additional research and analysis outlined as recommended

actions in this document are planned through the Implementation Strategic Steering Committee,

dedicated Working Groups, and Regional Blueprints.

Consultations Consultations were held with over 1,500 stakeholders from across the value chain to ensure engagement opportunities were as comprehensive as possible. Stakeholder groups include, but are not limited to the private sector, associations and NGOs, academia and research groups, Federal and Provincial Governments, and Indigenous Organizations, communities, and businesses.

Linkages with Industry Working Groups The Government has also collaborated closely with the Transition Accelerator, the Canadian Hydrogen and Fuel Cell Association (CHFCA), the Canadian Gas Association, and other industry associations which are pursuing actions closely aligned with those identified in the Strategy. Once the strategy is released, Canada will establish a Strategic Steering Committee, with several targeted task teams, to ensure progress toward the recommendations in the strategy is made and measured.

Abbreviations | Pg. III

Abbreviations

AHJ Authority Having Jurisdiction ASHP Air Source Heat Pump ATR Autothermal Reforming AZETEC Alberta Zero-Emissions Truck Electrification Collaboration BC-LCFS British Columbia’s Low Carbon Fuel Standard BECCS Bio-energy with Carbon Capture and Storage BEV Battery Electric Vehicle BNQ Bureau de Normalization du Québec CAD Canadian Dollars CCUS Carbon Capture Utilization, Storage CEC California Energy Commission CFS Clean Fuel Standard CHFCA Canadian Hydrogen and Fuel Cell Association CHIC Canadian Hydrogen Installation Code CI Carbon Intensity CMMP Canadian Minerals and Metals Plan CNG Compressed Natural Gas CO Carbon Monoxide CO2 Carbon Dioxide CSA Canadian Standards Association DAC Direct Air Capture DOE Department of Energy (US) DRI Direct Reduced Iron EER Energy Effectiveness Ratio FCEB Fuel Cell Electric Bus FCEV Fuel Cell Electric Vehicle GDP Gross Domestic Product GHG Greenhouse Gas GJ Gigajoule GW Gigawatt H2 Hydrogen HD Heavy-Duty ICE Internal Combustion Engine ICT Innovative Clean Transit IEA International Energy Agency IMO IP

International Maritime Organization Intellectual Property

IRAP Industrial Research Assistance Program LD Light-Duty LNG Liquid Natural Gas MCH Methylcyclohexane MJ Megajoule NG Natural Gas NH3 Ammonia NOx Nitrogen Oxides NRC National Research Council

Abbreviations | Pg. IV

OEM Original Equipment Manufacturer OpEx Operating Expenditures PEM Proton Exchange Membrane PJ Petajoules PSA Pressure Swing Adsorption RNG Renewable Natural Gas SMR Steam Methane Reforming SOEC Solid Oxide Electrolysis Cell SOx Sulphur Oxides SR&ED Scientific Research and Experimental Development Tax Incentive Program SDTC Sustainable Development Technology Canada TCO Total Cost of Ownership TRL Technology Readiness Level TWh VRE

Terawatt-hour Variable Renewable Energy

WGS Water Gas Shift ZEV Zero-Emission Vehicle

Contents | Pg. V

Contents Foreword to the Hydrogen Strategy for Canada ..................................................................................... I

Contributors ...................................................................................................................................... II

Abbreviations ................................................................................................................................... III

Executive Summary ......................................................................................................................... VIII

1. Why Hydrogen in Canada ................................................................................................................ 1

Canada’s Advantages .................................................................................................................. 3 Our unique starting point ............................................................................................................ 7 Hydrogen at scale delivers real benefits for canadians................................................................. 10

2. What is Hydrogen? ...................................................................................................................... 13

Hydrogen Fundamentals ........................................................................................................... 13 Global Momentum for Clean Hydrogen ...................................................................................... 16

3. Canada’s Production & Distribution Opportunities .......................................................................... 19

Production Pathways ................................................................................................................ 19 Canada’s Regional Hydrogen Production Resources .................................................................... 32 Production Pathways’ Cost & Carbon Intensity ........................................................................... 34 Hydrogen Storage & Distribution ............................................................................................... 39

4. Hydrogen End-Use Opportunities .................................................................................................. 44

Fuel for Transportation ............................................................................................................. 45 Fuel for Power Generation ........................................................................................................ 57 Heat for Industry & Buildings ..................................................................................................... 59 Feedstock for Industry............................................................................................................... 64

5. Putting it All Together: Canada’s Hydrogen Opportunity ................................................................ 69

Hydrogen as Part of an Integrated Energy System in Canada ............................................................. 69 Rollout Timing & Regionality...................................................................................................... 72 Quantifying the Opportunity...................................................................................................... 76 Hydrogen’s Decarbonization Potential ....................................................................................... 82 Economic Opportunity .............................................................................................................. 84

6. Opportunities Beyond Our Borders ................................................................................................ 88

Export Market .......................................................................................................................... 88 Target Markets ......................................................................................................................... 89 Enablers ................................................................................................................................... 92

7. Remaining Challenges ................................................................................................................. 96

Economic & Investment ............................................................................................................ 96 Technology & Innovation........................................................................................................... 97 Policy & Regulation ................................................................................................................... 97 Hydrogen & Infrastructure......................................................................................................... 97 Codes & Standards .................................................................................................................... 98 Awareness ................................................................................................................................ 98

8. Seizing Canada’s Hydrogen Opportunity........................................................................................ 99

Vision for 2050 ........................................................................................................................100 Roadmap to 2050 ....................................................................................................................101 Time to Act ..............................................................................................................................104

Contents | Pg. VI

LIST OF FIGURES

Figure 1 – Why Hydrogen in Canada? .................................................................................................. 1

Figure 2 – Canada's Starting Point for Low-CI Hydrogen Production and Use ......................................... 9

Figure 3 – Canada’s 2017 GHG Emission InventoryError! Bookmark not defined. ................................. 12

Figure 4 – What is Hydrogen? ........................................................................................................... 13

Figure 5 – Key Benefits of Using Hydrogen ........................................................................................ 14

Figure 6 – Hydrogen Value Chain ...................................................................................................... 15

Figure 7 – Global Hydrogen Production by Energy Source (2018)1 ....................................................... 16

Figure 8 – Global Hydrogen Demand by End-Use (2018)1 ................................................................... 16

Figure 9 – Ranges of Estimates for Annual Global Hydrogen Demand.................................................. 17

Figure 10 – International Momentum on Hydrogen ........................................................................... 18

Figure 11 – Hydrogen Production Pathways in Canada ....................................................................... 21

Figure 12 – Electricity Capacity and Primary Fuel Sources per Province in Canada................................ 22

Figure 13 – Canada’s 2018 Marketable Natural Gas Production by Province ........................................ 24

Figure 14 – Steam Methane Reforming (SMR) Process and Description............................................... 26

Figure 15 – Provincial Map of Potential Hydrogen Production Pathways ............................................. 33

Figure 16 – Comparison of Hydrogen Production Pathway Costs 2020, 2030, and 205034,35,,37 .............. 34

Figure 17 – Carbon Intensities of Hydrogen from Different Production Pathways34,35,,37 ....................... 36

Figure 18 – Truck-Based Delivery Cost for Hydrogen as a Compressed Gas and Cryogenic Liquid .......... 41

Figure 19 – Air Products Hydrogen Pipeline in Alberta ....................................................................... 41

Figure 20 – Hydrogen End-Uses ........................................................................................................ 44

Figure 21 – Hydrogen Uses in Transportation .................................................................................... 45

Figure 22 – Hyundai Nexo in Vancouver’s Modo Carshare Network .................................................... 46

Figure 23 – New Flyer's 40' Fuel Cell Electric Bus ............................................................................... 47

Figure 24 – Fuel Cell Electric Drayage Truck ....................................................................................... 49

Figure 25 – Canada's Ports as Hosts for Early Hydrogen Deployment HUBs ......................................... 51

Figure 26 – Alstom Hydrail with Hydrogenics Engine (Photo courtesy of Alstom) ................................. 53

Figure 27 – Canada's Coast to Coast Rail System ................................................................................ 54

Figure 28 – Electricity Generation by Fuel Type in Canada, 2018, source: Canada Energy Regulator ...... 57

Figure 29 – Carbon Intensity of Provincial Electricity Generation Sources ............................................ 58

Figure 30 – The Alberta Carbon Trunk Line project1 ........................................................................... 65

Figure 31 – Levelized Cost of Steel Production ................................................................................... 66

Figure 32 – Hydrogen use in Canada ................................................................................................. 68

Figure 33 – Hydrogen as Part of an Integrated Energy System in Canada ............................................. 71

Figure 34 – Lead Mid Term Regional Production and End-Use Adoption Potential of Hydrogen Across Canada............................................................................................................................................ 75

Figure 35 – Aggregate Demand Opportunity for Hydrogen in Canada ................................................. 76

https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192442https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192443https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192444https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192445https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192446https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192447https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192448https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192449https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192451https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192453https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192454https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192456https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192460https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192463https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192464https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192465https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192467https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192469https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192472https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192473https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192474https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192475https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192475

Contents | Pg. VII

Figure 36 – Hydrogen Cost Comparison as a Heating Fuel .................................................................. 77

Figure 37 – Hydrogen Cost Comparison as a Transportation Fuel ........................................................ 78

Figure 38 – GHG Emissions Reduction Potential of Hydrogen as a Heating Fuel ................................... 78

Figure 39 – GHG Emissions Reduction Potential of Hydrogen as a Transportation Fuel......................... 79

Figure 40 – 2050 Fossil Fuel vs Electrolysis Based Hydrogen Production .............................................. 81

Figure 41 – Canada’s 2017 Secondary Energy Demand ....................................................................... 82

Figure 42 – Canada’s 2050 Secondary Energy Demand Scenario ......................................................... 82

Figure 43 – Hydrogen Decarbonization Potential ............................................................................... 83

Figure 44 – Potential Role of Hydrogen in Reaching Canadian Decarbonization Targets – Transformative Scenario .......................................................................................................................................... 84

Figure 45 – Hydrogen Revenue Potential in Canada in 2030 & 2050.................................................... 85

Figure 46 - Hydrogen Sector Job Creation Potential in Canada in 2030 & 2050 .................................... 86

Figure 47 – Canada’s Potential as Hydrogen Exporter1 ....................................................................... 91

Figure 48 – Hydrogen and fuel cell facilities by region ........................................................................ 92

Figure 49 – CertifHy Green and Low Carbon Hydrogen Definitions ...................................................... 94

Figure 50 - Vision for Hydrogen in Canada in 2050 ........................................................................... 100

Figure 51 – Summary Hydrogen Adoption + Technology Timeline for Canada .................................... 103

Figure 52 – Implementation Working Groups .................................................................................. 115

Figure 53 – Roadmap to 2050 ......................................................................................................... 116

https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192482https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192483https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192488https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192490https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192491https://zenenergysolutions.sharepoint.com/sites/ZenDocumentLibrary/Shared%20Documents/Active%20Customers/NRCan/Strategy%20Document%20WIP/NRCan_Hydrogen%20Strategy%20for%20Canada_Final.docx#_Toc54192492

Executive Summary| Pg. VIII

Executive Summary

TIME TO ACT

The world’s energy systems are undergoing radical transformation driven by the need to mitigate climate

change. Development of an at-scale, clean hydrogen economy is a strategic priority for Canada, needed to diversify our future energy mix, generate economic benefits and achieve net-zero emissions by 2050.

The time to act is now. Governments around the world are releasing and executing hydrogen strategies that are building global momentum. In 2019, Canada seized this momentum by developing and launching a new Hydrogen Initiative under the Clean Energy Ministerial, designed to be the cornerstone for global hydrogen deployment.

Now, one year later, Canada is poised to leverage this momentum, to grow the domestic opportunity for hydrogen, while also benefiting from growth in global demand through export opportunities, guided by this Strategy.

This Strategy seeks to modernize Canada’s energy systems by leveraging Canadian expertise – including increased participation from marginalized and underrepresented groups – through building new hydrogen supply and distribution infrastructure and fostering uptake in various end-uses, that will underpin a low-carbon energy ecosystem in the near- and long-term. It will set the foundation to do this over the next five years by:

Encouraging early deployment HUBs in mature applications, and Canadian demonstrations in emerging applications;

employing regulations, including the forth-coming Clean Fuel Standard to drive near-term investments; and

framing new policy and regulatory measures needed to reach net-zero by 2050.

These activities in the short-term will be followed by the growth and diversification of the sector from 2025 to 2030. Thereafter, through rapid expansion until 2050, Canada will start to realize the full benefits of the hydrogen strategy.

Those benefits include:

positioning Canada to become a world-leading supplier of hydrogen technologies;

sparking economic recovery while growing domestic low-carbon fuel production to reduce emissions for the longer term, including unique opportunities for Indigenous communities and businesses;

generating more than 350,000 high-paying jobs nationally; and

employing hydrogen as a key enabler to reach net-zero emissions by 2050.

The International Energy Agency (IEA) has recommended that governments put clean energy solutions such as hydrogen at the heart of stimulus plans. Green infrastructure investments are key to achieving Canada’s post-pandemic economic recovery, clean growth and climate change objectives.

By applying its world-class expertise at home, Canada can showcase hydrogen’s real-world

Executive Summary| Pg. IX

applications and benefits and the role hydrogen can play in transforming energy systems. Early deployment HUBs will set Canada on a path for widespread deployment in the mid- and long- term where hydrogen’s decarbonization potential can be fully realized.

CONTEXT

Canada has played an important role in the development of the growing global hydrogen economy, starting more than a century ago with innovation in hydrogen production technology and four decades ago as pioneers in fuel cell technology. Canada continues to be an R&D and technology leader in the sector.

Under the Paris Agreement, Canada has committed to reducing GHG emissions by 30% below 2005 levels by 2030. It has also announced a target to achieve net-zero emissions by 2050, joining 72 other nations in this ambitious pledge. In a net-zero future, Canada’s economy will be powered by electricity and low carbon fuels – with low carbon fuels expected to provide up to 60% or more of our energy needs. As the lowest carbon fuel, hydrogen is essential to decarbonizing the top third of Canada’s most energy intensive and hard-to-abate end-use applications, and there is much work to do to roll out hydrogen at scale domestically.

Canada is not alone in seeing hydrogen as a critical part of the solution to combat climate change and improve air quality, while driving economic growth in a carbon-constrained world. Countries around the world have developed strategies to inform the optimal supply pathways and end-use applications for hydrogen, as well as to define export strategies.

The demand for hydrogen in global energy systems is dramatically increasing, with projections indicating at least a tenfold increase in demand over the next three decades. Studies

1 Bloomberg NEF. (2020). Hydrogen Economy Outlook. Retrieved from https://data.bloomberglp.com/professional/sites/24/BNEF-Hydrogen-Economy-Outlook-Key-Messages-30-Mar-2020.pdf

indicate that hydrogen could provide up to 24%1 of global energy demand by 2050. The number of countries with polices that support investment in hydrogen technologies is increasing, along with the number of sectors they target. Canada is uniquely positioned to become a large-scale exporter of hydrogen to serve this growing market, but domestic deployments must lead.

For three years, the Government of Canada, under the leadership of NRCan has been working with private sector stakeholders and governments at all levels to inform the development of the Hydrogen Strategy for Canada. The release of this strategy comes during unprecedented times. The world has been shaken by COVID-19, and there is daily evidence mounting that climate change poses an ever-increasing risk to the world’s economies, habitats, biodiversity, human health, and our future way of life.

Canada has all the ingredients necessary to develop a competitive and sustainable hydrogen economy. The modernization of Canada's energy

systems towards a low-carbon economy presents

a unique opportunity to leverage Canadians'

expertise to build new infrastructure assets to serve as a backbone for a low-carbon energy ecosystem across Canada with hydrogen playing an integral role, delivering up to 30% of Canada’s end-use energy by 2050.

This strategy is a call to action. Achieving decarbonization targets requires bold action and radical transformation of Canada’s energy system that must begin with the end in mind rather than working incrementally based on old paradigms.

https://data.bloomberglp.com/professional/sites/24/BNEF-Hydrogen-Economy-Outlook-Key-Messages-30-Mar-2020.pdfhttps://data.bloomberglp.com/professional/sites/24/BNEF-Hydrogen-Economy-Outlook-Key-Messages-30-Mar-2020.pdfhttps://data.bloomberglp.com/professional/sites/24/BNEF-Hydrogen-Economy-Outlook-Key-Messages-30-Mar-2020.pdf

Executive Summary| Pg. X

CANADA’S ADVANTAGES

Canada has unique competitive and comparative advantages that position the country to become a world-leading producer, user, and exporter of clean hydrogen, as well as hydrogen technologies and services. A strong

hydrogen economy will lead to financial, environmental, and health benefits for Canadians.

Rich in feedstocks to produce hydrogen

Canada has among the lowest Carbon Intensity (CI) electricity supplies in the world given our hydroelectric generation capacity and status as a Tier-1 nuclear region. Canada also has abundant fossil fuel reserves, world class CO2 storage geology, potential for growth in variable renewables, large scale biomass supply, and freshwater resources. All of these can be leveraged to produce hydrogen.

Leading innovation and industry position

Canada is known for its leading hydrogen and fuel cell technology companies and expertise. As of 2017, there were >100 established companies, employing >2,100 people, generating revenues >$200 million. Canada also has significant expertise in carbon capture technology, one of the keys to the production of low CI hydrogen from fossil fuels.

Strong energy sector

Canada’s energy sector accounted for 832,500 direct and indirect jobs as of 2019, with assets valued at $685 billion[1]. This skilled labour force coupled with strategic infrastructure assets position Canada to rapidly pivot to include at- scale hydrogen as an energy currency.

[1] NRCan. (2018). 10 Key Facts on Canada’s Energy Sector. Retrieved from https://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/energy/pdf/10-Key-Facts-on-Canada_s-Energy-Sector-2018-en%20.pdf

Established international collaborations

Canadian government, industry and academia are involved in international collaborations related to hydrogen that position Canada as a leader both from an innovation and commercial perspective.

Energy export channels to market

Canada’s proximity to hydrogen import markets including Japan, South Korea, California, the UK, Germany, and all of Europe, along with export assets such as deep water ports, established pipeline networks, and an emerging LNG industry, position Canada to be an exporter of hydrogen as the global economy evolves.

Canada’s Unique Starting Point

Canada is recognized as a global leader in the hydrogen and fuel cell sector, seen as a hub for technical expertise, intellectual property, and leading products and services. Canada is one of the top 10 hydrogen producers in the world today. An estimated three million tonnes are produced per year from natural gas. Canada is home to the largest clean hydrogen production facility in the world to produce hydrogen from natural gas with carbon capture and permanent storage for the resulting CO2 emissions.

By leveraging these advantages to develop a vibrant and robust clean hydrogen economy, Canadians will benefit from:

Economic growth and jobs

Canada’s hydrogen economy will create new green jobs in R&D, manufacturing, and services supporting increased participation from traditionally marginalized and under-represented groups as part of an inclusive transition. Hydrogen will become a new export currency for both regional energy economies in Western, Central, and Eastern Canada, as well as in the international market. This will allow

https://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/energy/pdf/10-Key-Facts-on-Canada_s-Energy-Sector-2018-en%20.pdfhttps://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/energy/pdf/10-Key-Facts-on-Canada_s-Energy-Sector-2018-en%20.pdfhttps://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/energy/pdf/10-Key-Facts-on-Canada_s-Energy-Sector-2018-en%20.pdf

Executive Summary| Pg. XI

Canadian energy companies to move up the value chain as a fuel provider in a zero-emissions future. If Canada fully seizes the opportunity presented by hydrogen, it could lead to more than 350,000 sector jobs and direct revenues of over $50B/year by 2050.

Transformative opportunity for Canada’s petroleum sector

Hydrogen is critical to transforming oil and natural gas industries to net-zero emissions. It provides an opportunity to leverage Canada’s diverse talent pool, valuable energy reserves, and infrastructure assets in a way that is carbon-free at the point of use, providing a future pathway to utilize these assets.

Energy resilience

Hydrogen can act as an energy carrier to enable increased penetration of renewables by providing time shifting and energy storage capabilities. Hydrogen adds optionality in a future net-zero mix, complementing other energy vectors such as direct electrification and biofuels, and serving as a bridge between energy grids in an integrated energy system.

Cleaner air

Hydrogen does not produce greenhouse gases, black carbon, particulates, SOx, or ground-level ozone at the point of use. When used in an electrochemical fuel cell, it emits only water and heat. Increased hydrogen adoption leads to cleaner air, with improved health outcomes for Canadians.

Meeting decarbonization goals

Hydrogen uniquely closes the gap in hard-to-abate, energy intensive applications such as long-range transportation, high-grade heat production, and as a feedstock in industrial processes. Hydrogen has the potential to make significant contributions to Canada’s required GHG emission reductions by 2050.

CANADA’S OPPORTUNITY

Clean hydrogen has the potential to deliver up to 30% of Canada’s end-use

energy by 2050, abating up to 190 Mt-CO2e of GHG emissions through deployment in transportation, heating,

and industrial applications.

With Canada’s strong starting position, emissions reductions from an optimistic transformative scenario could contribute up to 45 Mt-CO2e reduction by 2030. This scenario is more likely to be achieved with strong pricing and regulatory incentives in place at the federal and provincial level to drive hydrogen adoption, supported by immediate and aligned action across government and industry. Canada’s recently announced Strengthened Climate Plan, including carbon pricing, the Clean Fuel Standard and the $1.5 billion dollar Low-carbon and Zero-emissions Fuels Fund, is already putting in place foundational federal initiatives that will enable the broad suite of measures contemplated in this Strategy. Benefits realized by hydrogen will accelerate beyond the 2030-timeframe, with potential under the transformative scenario to contribute up to 190 Mt-CO2e reductions per year, by 2050.

Production

Canada’s rich feedstock reserves, skilled energy labour force, strategic energy infrastructure assets, and leading position in innovation in

Executive Summary| Pg. XII

hydrogen and fuel cell technologies position Canada to become one of the top three global producers of clean

hydrogen.

Canada is one of the top ten global producers of hydrogen today, producing an estimated 3 million tonnes (Mt) annually via steam methane reformation (SMR) of natural gas. While SMR is not considered a clean hydrogen pathway without carbon capture, Canada is well placed to transition to clean pathways going forward. Canada has established production supply chains, primarily in Alberta for fuel upgrading/refining and nitrogen fertilizer production that can be leveraged in the near term. By 2050, Canada could grow production by a factor of seven to meet domestic demand, producing >20 Mt of low CI hydrogen per year, with potential for significant expansion to meet global demand.

Hydrogen can be made from a variety of feedstocks, including water and electricity, fossil fuels, biomass and as a by-product from industrial processes. The CI of the hydrogen pathways can vary significantly, and Canada must be focused on developing cost-effective, low CI pathways in the near and mid term while ultimately transitioning to an increasing percentage of renewable or zero-emission feedstocks over the long term. Canada is working with countries around the world to develop a common methodology to determine and independently certify the CI of hydrogen, which will be necessary to facilitate trade.

Hydrogen production in Canada is expected to be based on a mix of pathways. The aggregate hydrogen demand projected in 2050 highlights the need for Canada to explore all low CI hydrogen production opportunities.

Electrolytic Hydrogen

Hydrogen can be produced from water via electrolysis using clean electricity. Canada is the sixth-largest global producer of electricity in the world and has one of the lowest carbon intensity grids due to our vast hydroelectricity

generating assets. There are also synergies between hydrogen production, nuclear and renewable electricity. Hydrogen can be produced via electrolysis using off-peak nuclear electricity in the near term, while high-temperature thermal processes or coupling with small modular reactors are viable in the longer term. Hydrogen can also play a role in daily to seasonal storage of variable renewable resources, enabling a higher penetration of intermittent renewables on the grid.

Hydrogen from fossil fuels

Clean hydrogen can be produced from fossil fuels when combined with Carbon Capture Utilization, and Storage (CCUS) or the carbon can alternatively be sequestered in the form of solid carbon. Canada is the world’s fourth largest producer of natural gas. Provinces with the highest natural gas and petroleum reserves are Alberta, British Columbia, and Saskatchewan, and the Atlantic Provinces, and these provinces are best suited for hydrogen production from fossil fuels.

Hydrogen from biomass

Hydrogen can be derived from the gasification of dry biomass. This is considered to be both renewable and carbon neutral. Most provinces in Canada have access to biomass residues through forest and agriculture sectors.

Industrial by-product hydrogen

Hydrogen in Canada currently produced as a by-product of industrial processes including chlor-alkali and sodium chlorate production can be captured, purified, and used directly. Vented hydrogen from large-scale plants can be sufficient to support some near-term needs, but is limited in supply.

The hydrogen supply network in Canada could include both large-scale centralized plants in Canada’s natural-gas rich provinces or in regions with high penetration of low-cost renewables, and smaller-scale distributed electrolytic production near demand centers. Delivered hydrogen costs of $1.50-3.50/kg are projected to be achieved as production scale is realized and investment is made in distribution infrastructure.

Executive Summary| Pg. XIII

Industry and Provincial Governments will play an important role in determining which hydrogen production pathways will come to fruition in Canada, and over what timeframes.

End-Use

Domestic deployment of hydrogen is critical to supporting Canada’s world-leading hydrogen and fuel cell sector, as well as to meeting climate change objectives. The earlier deployment starts, the sooner scale and user acceptance will be achieved, allowing the realization of longer-term projections on uptake and associated benefits.

Adoption of hydrogen will be focused on energy-intensive applications where it offers advantages over alternative low-carbon options. This includes using hydrogen as a fuel for long-range transportation and power generation,

to provide heat for industry and buildings, and as a feedstock for industrial processes.

Fuel for Transportation

Hydrogen can be used directly as a fuel in fuel cell electric vehicles, which have twice the efficiency of combustion engines and zero harmful emissions at the tailpipe. Hydrogen combustion and co-combustion engine technology is also under development as a transitional opportunity.

Fuel cell light-duty passenger vehicles are commercially available today globally, and in limited numbers in Canada. The Government of Canada has set federal targets for zero-emission vehicles (ZEV) to reach 10% of light-duty vehicles sales per year by 2025, 30% by 2030 and 100% by 2040. Canada considers battery electric vehicles (BEVs), fuel cell electric vehicles (FCEVs), and plug-in hybrid electric vehicles (PHEVs) to qualify as ZEVs. BC and Quebec have led provincially with the adoption of consumer purchase incentives for ZEVs and sales 1 Ballard. (2020). Fuel Cell Electric Buses. Retrieved from https://www.ballard.com/docs/default-source/web-pdf's/white-paper_fuel-cell-buses-for-france_final-english-web.pdf?sfvrsn=939bc280_0

regulations. Both of these provinces have started to deploy hydrogen fueling infrastructure and light-duty FCEVs.

Battery electric vehicles are expected to take a significant portion of the market share for light-duty applications in Canada. FCEVs offer choice for consumers desiring longer range and faster fueling times and are well suited to larger passenger vehicle platforms.

Public transit agencies around the world are shifting towards low- and zero-emission vehicles. Fuel cell electric buses (FCEBs) are commercially available today, with more than 2000 FCEBs1 in service worldwide, and approximately half of those are powered by Canadian technology. Canada has unique potential for a ‘made-in-Canada’ solution with New Flyer Industries and Ballard Power Systems leading the market with commercial fuel cell electric bus deployments in North America.

The zero-emission bus (ZEB) initiative2 underway in Canada encourages government to support school boards and municipalities in purchasing 5000 ZEBs over the next five years. Canada can leverage the local supply chain to provide economic value if FCEBs are a portion of the mix. These buses are well suited to longer routes and cold weather climate that Canadian transit agencies service.

Fuel cells are expected to play a significant role in medium- and heavy-duty trucks, rail, and ships that have operations with high power demand, coupled with energy-intensive and long duty cycles. For example, heavy-duty trucks travelling long distances would require many heavy batteries, reducing the load capacity beyond that which would be acceptable to operators. Long charging times could also impact operations negatively. The improved energy density and fast fill characteristics of fuel cell electric trucks will likely make them an optimal choice for certain applications.

2 CUTA. (2019). New federal government unveils its priorities. Retrieved from https://cutaactu.ca/en/blog-posts/new-federal-government-unveils-its-priorities

https://www.ballard.com/docs/default-source/web-pdf's/white-paper_fuel-cell-buses-for-france_final-english-web.pdf?sfvrsn=939bc280_0https://www.ballard.com/docs/default-source/web-pdf's/white-paper_fuel-cell-buses-for-france_final-english-web.pdf?sfvrsn=939bc280_0https://www.ballard.com/docs/default-source/web-pdf's/white-paper_fuel-cell-buses-for-france_final-english-web.pdf?sfvrsn=939bc280_0https://cutaactu.ca/en/blog-posts/new-federal-government-unveils-its-prioritieshttps://cutaactu.ca/en/blog-posts/new-federal-government-unveils-its-priorities

Executive Summary| Pg. XIV

There is a similar value proposition for hydrogen use in mining equipment, including material handling vehicles. Hydrogen presents an opportunity to reduce widespread reliance on diesel for mining vehicles and stationary power equipment. Hydrogen offers the added benefit of reducing harmful exhaust emissions, especially in underground mines. The Canadian Minerals and Metals Plan (CMMP) aims to capitalize on opportunities to strengthen Canada’s competitive position within the global mining sector and emphasizes the importance of developing and adopting alternative energy sources, such as hydrogen.

In the near term, as costs and availability of fuel cells challenge uptake, hydrogen-diesel co-combustion in truck applications offers an alternative pathway to create the demand for hydrogen and support infrastructure development.

Fuel for Power Generation

Hydrogen can be used as a fuel for power production through either hydrogen combustion in turbines or electrochemical conversion in stationary fuel cell power plants. Hydrogen provides load management, long-term energy storage, and a path to market that enables the growing use of intermittent renewables.

In the longer term, hydrogen can play a role in greening Canada’s electricity grids where there is still a reliance on fossil fuels for power production. Hydrogen can also provide stability for off-grid renewables-based power solutions in remote communities and remote industrial sites such as mines that are today largely dependent on expensive, highly emitting diesel power.

Heat for Industry

As a heating fuel, hydrogen is a cleaner-burning molecule that can be a substitute for the combustion of fossil fuels in applications where high-grade heat is needed and where electric

1 NRCan. (2017). Residential Sector. Retrieved from https://oee.nrcan.gc.ca/corporate/statistics/neud/dpa/menus/trends/handbook/handbook_res_00.cfm

heating is not technically or economically the best solution.

In Canada’s oil and gas sector, low CI hydrogen can offer emissions reduction benefits in both upstream extraction (combusted as a heat source) and downstream refining (used as a chemical feedstock). For example, in upstream operations, low CI hydrogen can replace natural gas combusted to produce steam for steam-assisted gravity drainage (SAGD) in-situ bitumen production. Hydrogen can lower the CI of conventional refined petroleum products in this way and could offer a compliance pathway for the federal Clean Fuel Standard.

Other heavy industry in Canada that relies on a large amount of high-grade heat production includes cement and steel manufacturing, the pulp and paper sector, and industrial processes relying on steam production. These sectors can also reduce emissions by converting to blends of hydrogen and natural gas or pure hydrogen for heat production.

Heat for Buildings

Hydrogen can play a role in reducing emissions in heating applications in the built environment. Natural gas (NG) utilities are looking to decarbonize the NG grid by introducing both Renewable Natural Gas (RNG) and hydrogen as alternative low-carbon chemical fuels. Canada’s cold climate results in heating accounting for almost 80% of energy use in the home.1 Since NG is used for both space heating and water heating, hydrogen is gaining increased attention from utilities as a low-carbon option, either as a blend with natural gas or as a replacement fuel. Several jurisdictions in Canada and worldwide are conducting pilot projects to determine the technical feasibility of blending hydrogen into existing natural gas systems. Codes and standards work will be required to support opportunities for the potential blending of hydrogen.

Due to possible technical constraints, beyond blending limits of ~20% by volume, dedicated

https://oee.nrcan.gc.ca/corporate/statistics/neud/dpa/menus/trends/handbook/handbook_res_00.cfmhttps://oee.nrcan.gc.ca/corporate/statistics/neud/dpa/menus/trends/handbook/handbook_res_00.cfm

Executive Summary| Pg. XV

hydrogen pipelines start to become an attractive alternative. In a net-zero future where distributed combustion emissions need to be largely eliminated, hydrogen may become the new chemical fuel of choice for heating in Canada, and utilities will play an important leadership role in that transition.

Feedstock for Industry

Hydrogen is used as a feedstock in several industrial processes in Canada today. Most feedstock hydrogen is currently produced via steam methane reforming.

Hydrogen is used as a feedstock for:

Petroleum refining

Bitumen upgrading

Ammonia production

Methanol production

Steel production

The greatest use of hydrogen globally today is for refining and upgrading crude oil, where hydrogen-based processes remove impurities like sulphur and process heavy hydrocarbon chains into lighter components. The majority of hydrogen required for refining is produced on-site from either dedicated production facilities or as a by-product. Because of this integration of hydrogen production within refining facilities, production is primarily supplied by natural gas reforming methods. The most significant opportunity to reduce emissions associated with hydrogen in the oil and gas industry is retrofitting existing conversion technology with carbon capture and storage or deploying new clean hydrogen technology that does not produce CO2.

Availability of low cost, low CI hydrogen can create new industry in Canada. This includes methanol production and liquid synthetic fuel production, an innovative process combining clean hydrogen and carbon captured from the air to produce carbon-neutral, energy-dense liquid fuels that are well suited to applications such as aviation and large marine vessels. Renewable

1 The Transition Accelerator. (2020). Towards Net-Zero Energy Systems in Canada: A Key Role for Hydrogen. Retrieved from https://transitionaccelerator.ca/wp-content/uploads/2020/09/Net-zero-energy-systems_role-for-hydrogen_200909-Final-print-1.pdf

nitrogen fertilizer production also presents an opportunity for a new Canadian industry.

Export

With worldwide demand for hydrogen increasing, the global market is expected to reach more than $2.5T by 2050. There is a significant export

opportunity for Canada as energy importers are actively looking to Canada as a potential supplier.

As an energy rich nation with significant clean hydrogen production capacity, established international trade partnerships, and strategic infrastructure assets such as deep water ports and established pipeline networks, Canada is positioned to become top global supplier of clean hydrogen. A 2019 BC study shows an export potential of $15 billion by 2050 from that province alone. Another recent study indicated that hydrogen exports could reach ~$50 billion by 20501, doubling the economic potential of the domestic market projected for Canada in that same timeframe. With import countries looking to decarbonize their energy systems, hydrogen could contribute to a significant portion of the energy export market share in the coming decades.

Just as Canada is working to capture the global LNG export market, we can build on this experience to advance a hydrogen strategy with strong early actions and a national plan that builds on Canada’s regional strengths. Taken together, we can lead in the emerging hydrogen export market.

https://transitionaccelerator.ca/wp-content/uploads/2020/09/Net-zero-energy-systems_role-for-hydrogen_200909-Final-print-1.pdfhttps://transitionaccelerator.ca/wp-content/uploads/2020/09/Net-zero-energy-systems_role-for-hydrogen_200909-Final-print-1.pdf

Executive Summary| Pg. XVI

REMAINING CHALLENGES

Economic and Investment

The factors limiting hydrogen use in some applications today are economic rather than technological, where hydrogen is not yet cost-competitive compared to other conventional fuel options.

While hydrogen can be among the lowest cost alternatives for reducing carbon emissions on a dollar-per-tonne-abated basis, a challenge today is that even with some form of carbon pricing, GHG emissions are not always adequately reflected in the market cost of baseline fuels. Implementation of the federal Clean Fuel Standard will be an important step forward.

The cost of end-use applications that rely on fuel cells is also a barrier to adoption, and R&D and scaled-up manufacturing processes are needed to drive down costs. Development of supporting infrastructure requires significant coordinated

investments, which is challenged by uncertain demand creating high risk for investors.

Achieving scale is also critical to economic competitiveness of the industry. While the sector must ultimately be self-sustaining, strong policy and fiscal support are needed in the next 5-10 years to attract and de-risk industry investment.

Technology & Innovation

Canada was an early leader in the hydrogen and fuel cell sector and is recognized worldwide as a region rich with technical expertise, intellectual property, and leading products and services. While some hydrogen and fuel cell technologies are at a level of commercial readiness, support for R&D is needed to reduce costs further, develop solutions in the less mature applications and discover new breakthrough technologies to benefit the sector. Continuing to stay at the forefront of innovation is critical to sustaining Canada’s competitive advantages.

Executive Summary| Pg. XVII

Other countries have been rapidly increasing investment to support innovation in the sector, whereas between 2008 and 2016, Canada slowed investment in fundamental research in this sector. While more recently, Canada has again committed to being a global leader in clean tech innovation, this gap in support has resulted in the fact that some Canadian companies developing research centres and/or moving parts of their operations to other countries where there is more support for technology advancement. It is important for Canada to act now to prevent loss of critical intellectual property.

Policy & Regulation

Clean hydrogen projects around the world have primarily been in regions with a combination of supporting policies and regulations. Policies and regulations that encourage the use of hydrogen technologies include low carbon fuel regulations, carbon pricing, vehicle emissions regulations, zero-emission vehicle mandates, creation of emission-free zones, and renewable gas mandates in natural gas networks. Mechanisms to help de-risk investments for end-users to adapt to regulations are also beneficial.

Canada currently lacks a comprehensive and long-term policy and regulatory framework that includes hydrogen. Where policies are in place, they are not consistent across regions resulting in a ‘patch-work’ approach that slows adoption.

Availability of Hydrogen Infrastructure

Domestic supply of low CI hydrogen is limited in many parts of Canada today, and this is preventing both pilot and commercial rollout. For some applications, there is a need to transport and store hydrogen from the site of production to the end-user. This includes refueling infrastructure for transportation applications.

Over time, as domestic production and demand grow, there will be a need for dedicated infrastructure such as hydrogen pipelines and liquefaction plants. Ensuring that these crucial assets can be built in a coordinated and timely manner will be essential to ensuring low cost, low CI hydrogen can be delivered to both domestic and international markets.

Codes & Standards

The deployment of hydrogen is in the early stages across many jurisdictions and sectors in Canada, and there are gaps in existing codes & standards that need to be addressed to enable adoption. Harmonizing codes and standards across jurisdictions will ensure that best practices are applied across the global hydrogen economy to facilitate the growth of trade and export markets.

Awareness

There is a lack of awareness about the opportunities and safety around hydrogen within the general public, as well as within industry and government. Increased awareness about hydrogen as a viable decarbonization pathway that is safe and provides economic benefits is critical to establishing a vibrant hydrogen sector.

PATH FORWARD

Vision for 2050

If Canada seizes the opportunities for hydrogen, by 2050 the country could realize the following:

Executive Summary| Pg. XVIII

Up to 30% of Canada’s energy delivered in the form of hydrogen

Canada is one of top 3 global clean hydrogen producers, with domestic supply >20 Mt/year

Established supply base of low carbon intensity hydrogen with delivered prices of $1.50 - $3.50/kg

>Five million FCEVs on the road

Nationwide hydrogen fueling network

>50% of energy supplied today by natural gas is supplied by hydrogen through blending in existing pipelines and new dedicated hydrogen pipelines

New industries enabled by low-cost hydrogen supply network

~350,000 hydrogen sector jobs

>$50 billion in direct hydrogen sector revenue for the domestic market

Established and competitive hydrogen export market

Up to 190 Mt-CO2e annual GHG reduction

Near Term: Laying the Foundation

The focus of the next five years will be on laying the foundation for the hydrogen economy in Canada. This includes planning for and developing new hydrogen supply and distribution infrastructure to support early deployment HUBs in mature applications while supporting Canadian demonstrations in emerging applications. Regulations such as the Clean Fuel Standard will be fundamental to driving near-term investment in the sector. Introduction of new policy and regulatory measures will also be needed.

Mid Term: Growth and Diversification

Activities to stimulate the sector in the next five years will be followed by growth and diversification of the sector in the 2025 – 2030 timeframe. As the technology matures and the full suite of end-use applications is at or near commercial technology readiness levels, hydrogen use will be focused on applications that

provide the best value proposition relative to other zero-emission technologies.

Long Term: Rapid Market Expansion

In the 2030-2050 timeframe, Canada will start to realize the full benefits of a hydrogen economy as the scale of deployments increase and number of new commercial applications grows, supported by Canada’s foundational supply and distribution infrastructure.

RECOMMENDATIONS AND IMPLEMENTATION

Recommendations

The release of this strategy is the first step in the next phase of Canada’s hydrogen journey. The recommendations will inform the development of concrete actions by all players across the hydrogen ecosystem.

In the implementation phase following the release of the strategy, there will be ongoing engagement with public, private and Indigenous stakeholders to continue the momentum, initiate and track activities related to the recommendations, follow progress, and identify new priority areas as the market evolves. Actions will be coordinated through a Strategic Steering Committee and Working Groups.

The Strategy’s recommendations have been developed in consultation with stakeholders and represent actions needed to lay the foundation and maintain momentum for maximizing the benefits of hydrogen in Canada’s future energy system mix.

There are 32 recommendations across the eight pillars of the Hydrogen Strategy for Canada. Not all of these actions will happen at once - the figure on page XXII outlines how Canada must sequence actions to seize the hydrogen opportunities over time, cementing its essential role in our low- carbon future.

Executive Summary| Pg. XIX

The Strategy’s recommendations represent sector-wide themes, highlighted throughout the Strategy. Recommendations have been proposed in eight pillars:

Pillar 1: Strategic Partnerships - Strategically use existing and new partnerships to collaborate and map out the future of hydrogen in Canada.

Pillar 2: De-Risking of Investments - Establish funding programs, long-term policies, and business models to encourage industry and governments to invest in growing the hydrogen economy.

Pillar 3: Innovation - Take action to support further R&D, develop research priorities, and foster collaboration between stakeholders to ensure Canada maintains its competitive edge and global leadership in hydrogen and fuel cell technologies.

Pillar 4: Codes and Standards - Modernize existing and develop new codes and standards to keep

pace with this rapidly changing industry and remove barriers to deployment, domestically and internationally.

Pillar 5: Enabling Policies and Regulation - Ensure hydrogen is integrated into clean energy roadmaps and strategies at all levels of government and incentivize its application.

Pillar 6: Awareness - Lead at the national level to ensure individuals and communities are aware of hydrogen’s safety, uses, and benefits during a time of rapidly developing technologies.

Pillar 7: Regional Blueprints - Implement a multi-level, collaborative government effort to facilitate the development of regional hydrogen blueprints to identify specific opportunities and plans for hydrogen production and end use.

Pillar 8: International Markets - Work with our international partners to ensure the global push for clean fuels includes hydrogen so Canadian industries thrive at home and abroad.

Executive Summary| Pg. XX

Executive Summary| Pg. XXI

Executive Summary| Pg. XXII

1|Why Hydrogen in Canada | Pg. 1

1. Why Hydrogen in Canada


1. Why Hydrogen in Canada?

Canada has all the ingredients necessary to develop a competitive and sustainable hydrogen economy, from rich feedstocks to produce hydrogen and world-leading innovation, to a strong energy industry and vast international relationships. This places Canada in a unique and advantageous starting position on the road to establishing a clean hydrogen economy. If Canada fully capitalizes on its advantages, by 2050 Canadians can benefit from more than $50B in domestic revenues, the conventional oil and gas sector can be transformed, a vibrant export market can be established, and the use of hydrogen can reduce emission by up to 190Mt-CO2e while improving air quality across the country.

CANADA’S ADVANTAGES

Rich in Feedstocks

Canada has one of the lowest carbon intensity (CI) electricity supply systems in the world, abundant fossil fuel reserves, world-class CO2 storage geology, large scale biomass supply, and freshwater resources, all of which can be leveraged to produce hydrogen.

Canada is the sixth-largest global producer of electricity, generating 652 TWh of electricity in 2017.1 Sixty-seven percent of Canada’s electricity comes from renewable resources and 82% from non-GHG emitting sources. Canada is the world’s third-largest producer of hydroelectricity, making up 60% of today’s total generation capacity.2 Canada also has significant potential to expand the deployment of variable renewables such as wind and solar. Electricity from wind energy is one of the fastest-growing sources of electricity in the world and Canada. Wind accounts for 4% of electricity generation in Canada today, and both wind and solar photovoltaic deployments are growing. Canada is a Tier-1 nuclear supplier, and 14.6% of nationwide electricity generation comes from Canada’s nineteen operating power reactors at four nuclear-generating stations in Canada. Canada is exploring the potential to expand nuclear capacity through small modular reactors that can provide non-GHG emitting power in remote communities, building on Canadian innovation in this sector.

Canada has the third-largest oil reserves in the world as well as one of the largest proven natural gas reserves, and at current rates of consumption can meet the country’s needs for 300 years, with enough

1 NRCan. (2020). Electricity facts. Retrieved from https://www.nrcan.gc.ca/science-data/data-analysis/energy-data-analysis/energy-facts/electricity-facts/20068 2 IEA (2020). Key World Energy Statistics 2020. Retrieved from https://www.iea.org/reports/key-world-energy-statistics-2020

https://www.nrcan.gc.ca/science-data/data-analysis/energy-data-analysis/energy-facts/electricity-facts/20068https://www.nrcan.gc.ca/science-data/data-analysis/energy-data-analysis/energy-facts/electricity-facts/20068


remaining for export1. Canada is home to one-fifth of the world’s large-scale carbon capture utilization and storage (CCUS) projects in operation, and a number of leading CCUS innovators that can be leveraged to support emissions reductions in multiple sectors - including low carbon intensity hydrogen production. Canada has a large supply of renewable forest biomass, as well as access to forest industry by-products and residues. B.C., Ontario, Alberta, Quebec, and New Brunswick are the provinces with the largest biomass capacity and generation. Finally, Canada has 7% of the world’s fresh water. Water is an important feedstock in the production of hydrogen using electrolysis powered by clean electricity.

Leading Innovation, Intellectual Property, and Industry Position

As a result of early leadership in RD&D and clean tech development Canada is known for its leading hydrogen and fuel cell technology companies and expertise. As of 2017, there were more than 100 established hydrogen and fuel cell companies spanning the full value chain, employing more than 2100 people in direct jobs within Canada, and generating revenues in excess of $200 million. The sector spends upwards of $90 million in revenue per year to keep Canadian companies at the forefront of innovation.2 There are new and established hydrogen and fuel cell companies as well as large energy companies and utilities developing and deploying hydrogen solutions in most provinces within Canada. British Columbia, Ontario, and Quebec host the largest clusters of companies in the sector.

Increasing global demand for hydrogen has led to export market opportunities for Canadian companies. For example, more than half of fuel cell buses deployed around the world contain Canadian fuel cell powertrain technology.3 Canadian companies are well positioned to supply technology, products and services in support of hydrogen production, distribution, storage, and fueling infrastructure, and end-use applications such as trains, heavy-duty vehicles, material handling equipment, marine and aviation propulsion systems, and back-up and stationary power solutions. Canadian technologies in areas related to electrolyzer products and advanced storage materials and engineered solutions also play a significant role in renewable energy systems across the world, integrating with wind and solar technologies. A Canadian supply chain has emerged that provides parts, components, testing equipment, and engineering and financial services to global hydrogen and fuel cell technology developers. Strategic partnerships between industry, academia, and federal labs have been instrumental in developing new intellectual property (IP) and training the next generation of talent for the sector.

Since 2012, Canadian funding to hydrogen clean tech and innovation has dropped, allowing other countries to catch up. Reinvesting in RD&D will enable Canada to capitalize on our head start and maximize Canadian technology penetration in emerging global markets. However, technology development alone will not secure Canada’s place in global markets. Following the release of the Hydrogen Strategy, it will be critical to continue to engage on an industrial strategy to further quantify the opportunity and set Canada on a clear path to secure our place in the Global hydrogen economy.

To grow clean hydrogen production in Canada, renewed support for CCUS is also required. Canada’s early leadership in this technology space is slipping, as competing countries are strengthening policy incentives and funding to drive RD&D and commercial deployment. Canada needs to take similar action to level the playing field with the US and other countries, and entice our world-renowned technology developers to deploy their expertise at home in support of domestic reductions as well as abroad to capitalize on the growing multi-billion-dollar global market for CCUS climate solutions.

1 CAPP. (2018). Canada’s Energy Mix. Retrieved from https://www.capp.ca/energy/canadas-energy-mix/ 2 CHFCA. (2018). Canadian Hydrogen and Fuel Cell Sector Profile. Retrieved from http://www.chfca.ca/wp-content/uploads/2019/10/CHFC-Sector-Profile-2018-Final-Report.pdf 3 Ballard. (2020). Fuel Cell Electric Buses. Retrieved from https://www.ballard.com/docs/default-source/web-pdf's/white-paper_fuel-cell-buses-for-france_final-english-web.pdf?sfvrsn=939bc280_0

https://www.capp.ca/energy/canadas-energy-mix/http://www.chfca.ca/wp-content/uploads/2019/10/CHFC-Sector-Profile-2018-Final-Report.pdfhttp://www.chfca.ca/wp-content/uploads/2019/10/CHFC-Sector-Profile-2018-Final-Report.pdfhttps://www.ballard.com/docs/default-source/web-pdf's/white-paper_fuel-cell-buses-for-france_final-english-web.pdf?sfvrsn=939bc280_0https://www.ballard.com/docs/default-source/web-pdf's/white-paper_fuel-cell-buses-for-france_final-english-web.pdf?sfvrsn=939bc280_0


Strong Energy Sector

Canada’s energy sector is critical to supporting the restart and recovery of the Canadian economy as it emerges from the COVID-19 pandemic. It accounted for 832,500 direct and indirect jobs as of 2019 , with assets of valued at $685 billion as of 2019. [1]It was also , and the energy sector was responsible for directly and indirectly contributing 10.2 percent % to Canada’s nominal GDP in that same timeframe.

A key component of this is the hard hit oil and gas industry, which is facing exceptional challenges due to fall in oil prices and a collapse in global oil demand because of the pandemic. Despite this, the petroleum sector remains an engine of recovery, employing 576,000 Canadians, including 11,000 Indigenous people, working in 4,500 companies across Canada.

Further reinforcing the energy sector’s strength and resilience is that existing and developing energy infrastructure assets can be repurposed for clean hydrogen. For example, Canada’s extensive network of natural gas transmission and distribution pipelines could act as large-scale energy storage and distribution networks for hydrogen, carrying either a blend of hydrogen and natural gas or pure hydrogen over the long term.

Storage assets such as depleted wells, saline aquifers and salt caverns can be an important enabler for wide-spread deployment by serving as permanent CO2 storage, and potentially for storing hydrogen at scale. In addition, Canada already produces abundant hydrogen from natural gas in the oil and gas sector used for upgrading and refining petroleum products, and these hydrogen generation assets can be leveraged and combined with new assets to produce abundant low CI hydrogen.

Canadian talent in the energy sector is extensive and spans all levels of the value chain in a wide range of areas relevant to hydrogen for at-scale production. From strategic R&D in the chemicals industry, to manufacturing of components and products ranging from materials to complete turnkey solutions, to construction and service and maintenance expertise, Canada’s energy labour force is well positioned to pivot to bring hydrogen into the energy fold.

Established International Collaborations

Canada has several bilateral and multi-lateral agreements in place, which formalize and strengthen collaboration with countries and regions around the world, including Germany, the EU, Portugal, and Japan. Over the last three decades, Canada has been a founding member of several international initiatives across the value chain and continues to leverage these strategic partnerships to advance global collaboration on hydrogen.

Canada was a founding member of the IEA Hydrogen and Advanced Fuel Cell initiatives, which evolved into the current Technology Collaboration Programs (TCPs) - designed to coordinate private and public researchers to accelerate R&D, demonstrations and advance innovation on a global basis.

Canada is a founding member and key partner in the International Partnership for Hydrogen and Fuel Cells in the Economy (IPHE). Member countries have committed to commercializing fuel cell and hydrogen technologies to address awareness and essential codes and standards.


Most recently, Canada led the development and launch of a Hydrogen Initiative under the auspices of the Clean Energy Ministerial (CEM). Canada co-leads this Initiative, comprised of more than 20 member countries, with the objective to be the cornerstone of global hydrogen collaboration and to incorporate hydrogen’s essential role in the global energy transformation in discussions of energy Ministers from around the world.

Canadian industry has also initiated international collaborations to accelerate and leverage R&D efforts and share learnings related to business case and practical deployment considerations. For example, the Canadian Hydrogen and Fuel Cell Association (CHFCA) and Australian Hydrogen Council (AHC) recently signed an MOU to strengthen collaboration between Canada and Australia in the commercial deployment of hydrogen and fuel cell technologies, including in mining and transportation applications.

Several of Canada’s most important energy partners, including Japan, South Korea, China, and the US have released national strategies or announced significant investments into their hydrogen economies (see Figure 10). This recent interest is driven by multiple factors and forces but some of the most important include:

The movement toward decarbonization across all sectors;

The increasing penetration of variable renewable energy sources;

The uncertainty of future investments in the oil and gas sector; and

The rapidly falling costs of hydrogen production technologies.

Unlike previous rounds of excitement around hydrogen, today’s interest is driven by the realization that hydrogen will be an essential tool to address climate change. While there are still many challenges to overcome, the message is clear: hydrogen will have a critical role in a carbon neutral future and most of the world’s largest economies are already developing the strategies and investments required to make this a reality.

Energy Export Channels to Market

With over $100 billion in exports1 as of 2017, Canada has established trade relationships for existing energy commodities such as natural gas, crude, refined petroleum products, and electricity that can be leveraged to offer a new low-carbon fuel to the market.

In addition, Canada’s proximity to hydrogen import markets including Japan, South Korea, California, and Europe, along with export assets such as deep-water ports, a developing Liquefied Natural Gas (LNG) industry, and established pipeline networks as well as natural gas and oil transportation companies, position Canada to be an exporter of hydrogen as the global economy evolves.

1 CER. (2017). Market Snapshot: Energy’s Share of Canadian Exports Growing Again. Retrieved from https://www.cer-rec.gc.ca/nrg/ntgrtd/mrkt/snpsht/2017/09-03nrgshrcndnxprts-eng.html

https://www.cer-rec.gc.ca/nrg/ntgrtd/mrkt/snpsht/2017/09-03nrgshrcndnxprts-eng.htmlhttps://www.cer-rec.gc.ca/nrg/ntgrtd/mrkt/snpsht/2017/09-03nrgshrcndnxprts-eng.html


OUR UNIQUE STARTING POINT

Canada has played an important role in the advancement of hydrogen production technology and storage and distribution equipment and has been a pioneer in fuel cell technology for more than 40 years. Canadian ‘hydrogen firsts’ include the first patent for electrolysis technology in 1915, and the first major breakthrough in proton exchange membrane (PEM) fuel cell power density in the early 1990s to prove the technology as viable for transportation applications.

Canada has a head start in deploying both production and end-use applications. For example, Canada deployed the first industrial-scale production of hydrogen in the 1920s, the first fuel cell bus demonstration in the 1990s, and the first fuel cell forklift and light-duty fuel cell electric vehicle in the early 2000s.

Today, Canada is one of the top 10 hydrogen producers in the world today, with an estimated 3 million tonnes of hydrogen produced per year. Most hydrogen in Canada is produced by the chemical industry and the oil and gas sector from fossil fuels. Geographically, most hydrogen is produced in Western Canada, followed by Central Canada and Atlantic Canada. With the anticipation of Canada’s federal low carbon fuel standard, existing users of hydrogen, including refinery operations, are exploring alternative pathways for hydrogen production. Alternative production pathways include electrolysis or steam methane reforming (SMR) of natural gas coupled with CCUS, to use cleaner hydrogen as a feedstock and compliance pathway

to reduce carbon intensity of conventional fuels.

Industrial gas companies operate in both Ontario and Quebec, with hydrogen production and liquefaction assets. Air Liquide’s addition of a 20 MW proton exchange membrane (PEM) electrolyzer at its plant in Bécancour, Quebec which it describes as the largest in North America, increases the facility’s production capacity by 50%. Over and above this, there are a number of other new hydrogen production projects in development across Canada.

Canada continues to be an R&D and technology leader in the sector. For example, Canadian heavy-duty fuel cell engine technology powers more than half of worldwide fuel cell electric buses in revenue service in a range of international markets and climates. In 2018, Canadian technology was used in the first hydrogen powered commuter train. Novel hydrogen production techniques are being pioneered across the country, positioning Canada as a global leader in next-generation clean hydrogen generation. Canada’s expertise and technologies are exported and used in countries around the world, demonstrating the opportunity for growth and deployment on an international scale.

Despite this success, there are currently few large-scale domestic hydrogen projects. This impacts Canada’s global competitiveness in several ways. First, Canadian companies are not able to point to relevant examples of local deployments when promoting their technologies abroad. Second, Canadian talent is being drawn to other jurisdictions where there are more opportunities to develop hands-on experience. Finally, industrial clusters supporting hydrogen technology development, deployments and supply chains are unable to build or retain a critical mass of activity.

While domestic deployments are limited, the sector is not starting from zero. There are activities related to low CI hydrogen production and use happening across Canada, as shown in Figure 2. There are strategic hydrogen production and liquefaction assets in Eastern Canada, and end-use applications range from


deployments of light-duty FCEVs and hydrogen retail fueling infrastructure, to pilot projects to explore blending of hydrogen into natural gas networks to decarbonize natural gas. There are also many projects in development and regional studies being conducted to explore hydrogen opportunities. This infographic does not include production and use of grey hydrogen in the oil and gas and nitrogen fertilizer production sectors. These industries represent an opportunity for conversion to low CI supply, providing important anchor tenants as production capacity of low CI hydrogen in Canada is expanded.

Current global momentum on hydrogen presents a significant opportunity for Canada if it is able to continue to be a leader in technology development supported by new local deployments. Without local projects and active investment, other countries will erode this first mover advantage and Canada’s technology is at risk of becoming outdated. Now is the time to act and invest in Canada’s hydrogen future.


Figure 2 – Canada's Starting Point for Low-CI Hydrogen Production and Use


HYDROGEN AT SCALE DELIVERS REAL BENEFITS FOR CANADIANS

Economic Growth

Canada’s hydrogen economy will create new jobs in R&D, manufacturing, and services. Hydrogen will also become a new export currency for both regional energy economies in Western, Central, and Eastern Canada, and in the international market. This will allow Canadian energy companies to move up the value chain as an end-use fuel provider in a zero-emission future. Canadian companies already export goods and services related to hy

Seizing the Opportunities for Hydrogen...As we rebuild our economy from the impacts of COVID-19 and...

Documents

Transcript of Seizing the Opportunities for Hydrogen...As we rebuild our economy from the impacts of COVID-19 and...